In an intergenerational business transfer (“IBT”), there generally is no acquisition of control of the target company (“Targetco”) for tax purposes because its shares are sold to a corporation controlled by the seller's children (“Childco”), who are related to the sellers.

Accordingly, when there is a vertical amalgamation of Targetco and Childco, the cost of the target corporation's eligible assets cannot be bumped by virtue of the s. 88(1)(d.2) rule – which provides that if control of the target corporation was transferred between related persons, the relevant acquisition of control date for purposes of the bump calculation is the date of the last transfer between arm's length parties (generally establishing the historical cost), rather than the most recent transfer between non-arm's length parties.

S. 88(1)(d.3), which deems control to have been acquired by an unrelated person at the time of death, has no application to an IBT.

The absence of a bump is significant, for example, for agricultural corporations, where a substantial portion of the share value is often attributable to farmland.

Neal Armstrong. Summary of Julien Théberge, “Intergenerational Business Transfer: Appearance of Parity with a Third-Party Sale?”, Tax for the Owner-Manager, Vol. 20, No. 2, April 2020, p. 2 under s. 88(1)(d.2).

Regarding whether a nursing home or a rooming house was a flipped property, CRA first indicated that it considered that a “housing unit is normally represented by a room, or a group of rooms, used for residential purposes, occupied by a person or group of persons, and which includes a certain number of characteristics such as a kitchen, bathroom, etc.”, and that the term “housing unit” was restricted to single housing unit.

CRA then stated:

Although a nursing home may contain elements of a housing unit (such as a kitchen, bathrooms, etc.), it is our view that a nursing home would generally not be considered a flipped property.

It is unclear whether this is reflecting a view that a nursing home is a care rather than residential facility (see Blanche’s Home Care).

Turning to a rooming house, where individual rooms are rented out but the residents share a kitchen and bathroom facilities, it stated:

[W]e would generally consider the rooming house to be a property that is one housing unit for purposes of the flipped property rules – i.e., it is a room or group of rooms used for residential purposes, occupied by a person or group of persons, with a certain number of elements such as a kitchen, bathroom, etc.

Even if each bedroom went beyond basic furnishings to include a mini fridge, table and basic cooking setup such as a small stove or hot plate, CRA considered that such room would not constitute a housing unit, so that the property would not be excluded from “housing unit” status through having multiple housing units.

Neal Armstrong. Summary of 18 December 2025 External T.I. 2025-1055741E5 under s. 12(13)(a).

A resident individual wholly owned Canco, and also wholly owned FA1 which wholly owned FA2.

In November of a particular year, FA1 and FA2 were merged, with FA1 as the survivor. Then, that December, the individual transferred all of the shares of FA1 to Canco on a s. 85(1) rollover basis.

In confirming that Reg. 5907(8)(a) would not apply in respect of that merger to deem the taxation years of the two FAs to terminate and (in the case of FA1) restart with the merger for surplus-computation purposes because, at the time of the merger, FA1 and FA2 were not yet foreign affiliates of Canco, the Directorate first noted, as relevant context, that Reg. “5907(8)(a) is relevant to the computation under subsection 5905(3) for the purpose of determining the various initial surpluses or deficits of the foreign affiliate resulting from the merger in relation to a corporation resident in Canada,” and then stated:

The grammatical and ordinary meaning of the words “foreign affiliate of a corporation resident in Canada” found in paragraph 5907(8), read in their specific context with regard to the purpose of the foreign affiliate regime and, in particular, taking into account the close link between that paragraph and subsection 5905(3), demonstrates that those words refer to a foreign corporation having that status in relation to a corporation resident in Canada immediately following the merger.

A textual, contextual and purposive interpretation of the provision does not reveal any elements supporting a conclusion that the terms of paragraph 5907(8)(a) could have retroactive effect where the status referred to in the provision is acquired at a time subsequent to the merger.

Neal Armstrong. Summary of 14 January 2026 Internal T.I. 2023-0990701I7 F under Reg. 5907(8)(a).

The taxpayer and her spouse, who currently reside in the United States, will immigrate to Canada upon or after retirement. They will then begin withdrawing funds from their US 403(b) plan (and the underlying Roth 403(b) account), to which the taxpayer had made after-tax contributions and (in the case of the underlying Roth 403(b) account) her spouse had made both pre-tax and after-tax contributions.

CRA stated that it “generally consider[s] a 403(b) plan, including the Roth 403(b) account to be an EBP [employee benefit plan]”. On this basis, amounts received from the plan would be included in income under s. 6(1)(g), subject to the exclusion in s. 6(1)(g)(ii) for returns of employee contributions that have not been previously deducted.

CRA indicated that a “403(b) plan qualifies as a pension for purposes of Art. XVIII of the Treaty.” However, IRC s. 107 excludes a minister’s housing allowance from U.S. taxable income. Accordingly, distributions received from the 403(b) plan by a resident of Canada that were designated as a minister's housing allowance would not be taxable in Canada pursuant to the exclusion in Art. XVIII for amounts that would be excluded from US taxable income if received by a US resident.

Neal Armstrong. Summaries of 13 June 2023 External T.I. 2022-0952971E5 under s. 6(1)(g) and Treaties – Income Tax Conventions – Art. 18.